Is the High Price of Oil a Conspiracy? by Karen Campbell
The Bear on Jul 18 2008 at 8:24 am | Filed under: Energy Policy
Why is the price of oil a difficult concept for some on the left? They want to come up with some grand conspiracy theory and rush to command-and-control legislation claiming that Americans have a “right to lower gas prices.” This is at best silly but at worst dangerous.
This mentality hinders future economic growth by giving people a victim mentality and stifles the entrepreneurial spirit by making it seem as though government is the only one who can solve the problem. Congress is now fixated on speculators. If Congress wants to weed out speculators, it should allow more potential supply. Anticipation of increased supply will put downward pressure on future oil prices and hence the prices of these future contracts will decline. If these markets have run amok with speculators, these speculators will immediately see the value of their contract decline. (No one is going to want a speculators contract to buy a barrel of oil at $130 when they expect the price to be $100.) Hence Congress quickly punishes speculators in the most efficient way possible — using the market’s discipline rather than holding committee meetings and investigations and then imposing fines and then collecting fines and then who knows what.
High gas prices are not a conspiracy, they are a signal. Modern economies run on energy. As more countries’ economically develop the value of energy increase. Resources are scarce. (Despite what some say, conservatives are not hoarding all the world’s resources.) This means there is a cost to using resources (labor, land, capital) to supply a product. The high price is telling consumers that the resources needed to get more oil supplied are getting more costly. This may be due to oil running out, but it is more likely the cost for extracting oil has significantly increased. This is especially true when there are oil reserves that could be inexpensive to develop but are currently considered off-limits.
The “new” idea on the left is to allow drilling BUT only where Congress commands — no matter if exploring an oil reserve makes economic sense or not. The argument that the oil companies already have permits to drill in areas and they are currently not doing so. The left has taken to a “use it or lose it” mantra. To use their exercise metaphor, people “lose it” because exercising is hard and that makes it more costly to “use it.” The fact that oil companies have these permits and have not been “using it” must indicate that the benefits have not outweighed the costs. Oil drilling is hard and costly. If we want the price of oil to decrease, why do we want companies’ to drill in places where it is the most costly to do so?
How do we deal with our current economic woes? The economy does not need to be solved. It is not a Suduko. An economy simply describes a group of people with values, skills and resources and any technology and institutions they use.
But there are rules. For example, the market mechanism is one rule.
A market gives incentives to entrepreneurs (whether employed within a firm or on their own) to find ways to bring costs down. To the extent we let them do so in the case of oil production, the consumer will ultimately be the beneficiary. Entrepreneurs have brought cell phones that can email, E-Z passes on highways, self-cleaning ovens and endangered animal tracking devices. Shouldn’t we listen to what they think is the solution?
One Response to “Is the High Price of Oil a Conspiracy? by Karen Campbell”
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I hate to disagree with you, but it IS a conspiracy. Those in power are manipulating the markets intentionally. Evidence? How about every time oil drops five bucks, it “eases” or “slips” or “advances before retracing”, but when it goes up by fifty cents, it “surges to a new high” even though the daily trading range might be five bucks! How about every time there’s some measeley little attack on a pipeline in Nigeria or some such place, it’s played up through the news media, where oil “surges to a record high again, twelve cents higher than yesterday, on suppy concerns”, yet congress says supply isn’t the problem. How about their excuse that we shouldn’t plant apple trees since we won’t have any apples from them tomorrow?
The powers that be want America to fail, and the biggest attack on it right now is our currency. They wish to take away our moral authority, they wish to take away our ability to defend ourselves, but they most assuredly have already taken away our currency, and are using it to strangle us whenever we don’t play ball. The oil increase is primarily in dollars, which means for the other currencies, there hasn’t been anything LIKE the rise for us, and this was done intentionally. The intention is to replace the world’s reserve currency, which is currently dollars, with euros. Why? Then, with our currency worth less and less until it’s worthless, they can replace it with the Amero, but only if we agree to merge into a Union with Mexico and Canada, in order to let THOSE economies support the one they’ve trashed here. How do you strangle a country? You make it twice as expensive for their energy as you do for everyone else in the world, and you do that by deflating their currency, not just by printing more (which they do), but by damaging it’s reputation, essentially attacking it’s credit rating, in the market place.
To blame this on market forces is ludicrous. They are simply the tool the manipulators use, and they’re big enough to throw all of us “speculators” (yes, I am one, though how my one contract can damage the world is beyond me) to the lions whenever they want, and this is the way they’re doing it. They scare you with us, making us the bogeymen, so you’ll give them more power over us, when it’s the individual trader making liquidity in the market, something that makes markets tradeable, more efficient, more honest.